High Tech's Log Cabin

High Tech's Log Cabin

It's both true and romantic that entrepreneurs such as Bill Hewlett and Dave Packard launched corporations in their garages, but their success owes much to years spent in conventional business positions.

Read Time:
2m 7sec

the source: “A Garage and an Idea: What More Does an Entrepreneur Need?” by Pino G. Audia and Christopher I. Rider, in California Management Review, Fall 2005.

“Birthplace of silicon valley” reads the plaque outside one of California’s official historic landmarks: a  garage on Addison Avenue in Palo Alto where, in 1938, the cofounders of Hewlett-Packard began their ascent to fame and fortune. It’s a sacred item of American mythology that big dreams are born in humble places. The Walt Disney Company, Apple Computer, and Mattel all have garages in their pasts, and other firms can boast a basement (United Parcel Service), a dorm room (Dell Computer), or a kitchen (Lillian Vernon) in theirs. Indeed, business school students in one recent survey estimated that nearly half the entrepreneurs in the country get started that way.

That estimate is way too high, say Pino G. Audia and Christopher I. Rider, a professor of organizational behavior and a graduate student, respectively, at the Haas School of Business at the University of California, Berkeley. But far more important than the number of garage-style start-ups is the misunderstanding of their character. The myth of lone-wolf entrepreneurs casting aside all connections to the corporate establishment on their way to glory obscures the vital “social” dimension of these success stories. The entrepreneurs often “acquire the psychological and social resources necessary to form new companies through prior experiences at existing organizations in related industries.” In one study, 70 percent of 890 founders of new businesses had had such experiences.

Take William Hewlett and David Packard. Before they began building custom electronic devices in that Addison Avenue garage, Packard had worked at General Electric, and with an inventor at Litton Engineering Laboratories. The pair had met as students at Stanford University, where both took a graduate course in radio engineering from Frederick Terman, the authors note. “Terman was instrumental in introducing the two to potential customers and suppliers and in arranging for fellow­ships and jobs to pay for the co­founders’ living expenses. Litton provided space and equipment for the production of many of Hewlett and Packard’s early orders.” From his courses at Stanford and his work at GE, Packard had “gained confidence in his ability to handle the legal and business matters of the young company.” HP’s first “real product” was an audio oscillator Hewlett had developed in Terman’s lab.

After about a year, Hewlett and Packard moved out of the garage. It certainly had played a role in their success, but hardly the starring one that legend assigns it.

More From This Issue